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Understanding the Fair Dealing Guidelines

The Monetary Authority of Singapore (MAS) has recently updated its Fair Dealing Guidelines, effective from May 30, 2024. The Fair Dealing Guidelines are a set of principles aimed at promoting fairness in the financial industry.

The Board of Directors and Senior Management of financial institutions play pivotal roles in establishing and maintaining a culture of fair dealing within their organizations. According to the Monetary Authority of Singapore‚Äôs (MAS) Guidelines on Fair Dealing, they are responsible for embedding fair dealing outcomes in all aspects of their institution’s operations, from product design and governance to sales practices and customer service. This guideline outlines five key outcomes that financial institutions must achieve:

1. Customer Confidence: Customers should have confidence that they are dealing with financial institutions where fair dealing is central to the corporate culture.

Key Actions:

  • Establish clear strategies and align policies with fair dealing principles, this includes robust due diligence procedures for products and services, effective supervision of representatives, and transparent pricing structures.
  • Regularly communicate the importance of fair dealing.
  • Continuously review and improve fair dealing practices.

For example, assigning a Chief Executive Officer to oversee a dedicated Fair Dealing team responsible for reviewing processes and driving cultural change and achieve fair dealing outcomes.

2. Suitable Products and Services: Financial institutions should provide products and services that are appropriate for their target customer segments.

Key Actions:

  • Testing products before launch to ensure they meet the needs of target customer segments. For example, testing an investment product under various market conditions can help adjust its design to better serve customers.
  • Monitoring customer feedback post-launch to improve product design.

3. Competent Representatives: Emphasizes the importance of having competent representatives who can provide appropriate advice and services to customers.

Key Actions:

  • Implement ongoing training programs covering regulatory requirements, market developments, and fair dealing principles. Representatives should be supervised closely until they demonstrate the necessary competency to serve customers independently
  • Establish robust supervisory frameworks. Regular compliance checks should be performed to ensure adherence to these practices.
  • Align incentives with fair dealing outcomes.

For example, A representative conducts a detailed fact-find and needs analysis for a customer seeking low-risk investments, ensuring the recommended product aligns with the customer’s risk tolerance and financial goals.

4. Clear, Relevant Information: Customers should receive clear, relevant, and timely information about the products and services offered to make informed decisions

Key Actions:

  • Use simple language and highlight key features and risks.
  • Ensure information is consistent and accurate. All relevant information about products should be disclosed upfront, including potential risks, costs, and any changes over time
  • Provide regular updates on product performance.

For example, Customers are provided with regular updates on their investment products, including performance reports and any changes to the terms and conditions.

5. Effective Complaint Handling: Financial institutions should handle customer complaints independently, effectively, and promptly.

Key Actions:

  • Establish clear and accessible complaint submission procedures.
  • Ensure fair and prompt resolution of complaints.
  • Use complaint data to identify and address systemic issues.

For Example, a financial institution sets up a centralized unit to manage complaints, with all complaints discussed at monthly management meetings.

By adopting these practices, financial institutions can align with the MAS Fair Dealing Guidelines, ensuring fair treatment of customers and maintaining their trust and confidence.

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